In a year when top-tier Oscars went to niche-market movies, why are business plaudits going to do a blockbuster deal such as AT&T’s just-announced $67 billion acquisition of BellSouth? If scale doesn’t work in movies anymore, why should it work in business?
As soon as word broke of the deal, pundits crowed it would reshape the telecom and media landscape, giving the telephone and wireless players more stability and clout against the cable folks and enabling them to roll out advanced services more quickly. Analysts quickly followed suit: “This is an industry of scale and scope,” said Yankee Group’s Eileen Eastman, calling the deal “largely a positive for both the industry and customers.”
Do you believe in the power of telecom mergers? I don’t -- not unless they can also change their regulated-utility cultures to become more efficient and innovative. There is nothing worse than bad execution and risk aversion on a bigger scale. Can the new twin big-Bells (AT&T and Verizon) figure out what last-mile fiber is good for? Can they add real value via IP-based services in the layers they control? Can they become customer-oriented, after decades of “gotcha” if you weren’t smart enough to pick the exact right calling plan? Do they, as dot-commers used to say, “get it”?
Consumers will see the most immediate impact of the deal, analysts agreed, from the consolidation of Cingular Wireless under one roof, plus likely further discounting of DSL and faster deployment of video and integrated wireless/wireline services. But let’s take a look at the enterprise impact: Small businesses will lose, Forrester Research predicted, while large enterprises will win. “The new AT&T behemoth will give small and medium-size businesses short shrift,” said the report, while keeping attention “on enterprises which intersect with their full portfolio, national and global, with a promise of end-to-end quality of service.”
Yankee Group had a slightly more positive spin, predicting the new giant would figure out how to expand its product offering to the midmarket, not just large enterprises. “Our research shows that enterprise-light products do not do well in the SMB space. … SMBs need products designed specifically for their businesses,” Yankee said. But the company also noted the potential downside of the reduction in facilities-based competition -- particularly for midsize and large enterprise customers and wholesale buyers.
Gartner’s take was the most positive -- that AT&T’s new wireless business will emerge as a stronger competitor to Verizon Wireless and Sprint Nextel and will be in a better position to achieve fixed/mobile convergence, thus benefiting enterprise wireless customers. Renegotiate contracts soon after the deal closes, Gartner advised, and aim for a multicarrier strategy if possible.
My take? I’ll miss the BellSouth name, because it had a nice genteel ring you don’t always get in the telecom world (remember Pacific Telesis and NYNEX?). But if this consolidation somehow ends up accelerating competition and increasing risk-taking (big hairy bets on fiber or VoIP or 3-D video transporters and so on), providing a more robust 21st century IP dial tone at a lower cost per unit (from scale efficiencies), I’ll take it.
It would also be nice, in an age when only a short list of huge platform companies really matters to the enterprise (Microsoft, IBM, SAP, Cisco, Oracle, Google) to have another couple of behemoths (ATT, Verizon) in the game. Go to it, folks.